IRS Problems, IRS Tax Problems

TALK is Another 4 Letter Word

October 4, 2012 - IRS Problems, IRS Tax Problems

Are you an employer? Are you and employee? I own my own business. I am both. I wear both hats. Recently I spoke with a client who also is an employer. He has employees. And he has a problem with one of his employees. I have learned so much over my varied career. I want to share with you what I’ve learned to help you have a better workplace. Now I don’t have all the answers. No one does. But see if you experienced any of what I experienced.   Savings Comes In Many Forms… While BulletProofYourTaxes is all about saving you money, some of that money is on the tax side; some of that money is on the business expense side. If you can save a dollar of expense, you might pay a little more in tax, but you are still money ahead. Like me, and like many of you, my client had been an employee before he had become an employer. When he hired his own employee he was so grateful to have help in his office so he could do what he did best. Let’s make it simple and call him Jack. And let’s make his office helper a woman and call her Jill. What’s the first thing any employer today must do? There are so many “firsts”. Let’s start with the paperwork. First have your employee complete the Form W4, Employee’s Withholding Allowance Certificate and corresponding state withholding form for you state if you are in a state that imposes an income tax. Then together you complete the Form I-9, Employment Eligibility Verification. In Arizona we must notify our Arizona Department of Economic Security of all new hires or re-hires so they can let us know if child support payments must be diverted from the worker’s paycheck. I recommend you check with your own state about their particular requirements. All of these forms will contain the employee’s name, address and social security number. So it is critical that you protect this information from potential identity theft. And your weekly pay check information will be used to prepare the quarterly reports, federal tax deposits and year-end W2 forms. I advise you, as I do my own clients, to make sure you have this paperwork in your files BEFORE you write that first paycheck. This gives you the documentation you need to protect your payroll deduction.   An Ounce of Prevention… Some of my clients who didn’t understand they could TALK with me before hiring that first employee also didn’t get the W4 before they wrote that first paycheck. And then another paycheck was written. And then another payday came around. And no W4 was ever obtained. And the employee quit. Do you think the employer can get that social security number now? Uh, no. Oops. Don’t let this happen to you. Now you might wonder, well, can’t you just treat this no-W2 person as an independent contractor responsible for reporting their own income and paying their own social security tax and income tax. No. Because you had control over where the job was done, when the job was done, how the job was to be done, this person was an employee. And you, the employer, have to be sure to fulfill your paperwork responsibility.   More TALK! Another important first actually happens in the interview process, before the actual hiring is done. TALK. Communication is the key here. It is imperative that YOU know what you want this employee to do for you. You must clearly communicate your expectations to that prospective employee. How can they possibly do the job you want them to do if you don’t let them know what you want done and how you want it done. I had many different jobs before joining the government ranks. And I worked for the City of Phoenix before I worked for the United States Government. Each had their own chain of command, their supervisors, their “bosses”. I was privileged to be part of a hiring team. And remember an applicant who drove all night from California for a morning interview in Phoenix, Arizona. I felt bad for the applicant and really wanted to give him a chance, when my boss asked me if I really felt he was our best choice for the job. This same manager had earlier shared with me her need to fire an employee who was not satisfactorily doing the job that needed to be done. It was difficult firing that person. But years later that same terminated employee came back to thank her. He really had not been well-suited for the job and being fired allowed him to find a job that suited him better. That was the happy ending, but the middle of that story had been rough.   What To Do During a period of unsatisfactory performance you want to have a performance review. Have an interview, a conversation, TALK with your employee. Re-visit the job description. Restate your expectations. Ask what is the problem. Ask how you can help them meet your expectations. If it should happen that you terminate this employee, you want to be sure you have in your files documentation (there’s that “D” word again) to support your action. If this employee should file for unemployment benefits, you want to be able to defend your decision and to keep your business from incurring a rise in your unemployment tax expense. I wish everyone had the job that was just perfect for them. I remember reporting for work every day and wishing I could just win the lottery so I could quit. That is not they way we are supposed to live our lives. I didn’t expect that miracle, so, of course, it never happened. I just changed my attitude and learned how to improve my own situation.   It’s All About Saving You Money! The whole purpose of this blog is to help you be aware that being an employer is more than just writing a paycheck, paying your employment taxes, and issuing a W2 at the end of the year. We have just begun the 4th and final quarter for 2012. 3rd quarter employment reports are due at the end of this month. W2 forms are due out before the end of January. Do what you need to do to be on top of your employment game.   To your lowest legal tax, Nellie Williams, EA  

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